Piper Sandler cuts HubSpot rating after Q3 results, says stock is ‘fairly valued’

Investing.com -- Piper Sandler analysts on Thursday cut their rating on HubSpot (NYSE:HUBS) shares to Neutral from Overweight, while raising the price target from $570 to $640.

The investment bank acknowledged the company’s strong execution in the third quarter, which led to a 3.6% top-line beat and a 20% growth in subscriptions.

The solid results sent its shares rising more than 5% in premarket trading Thursday.

HubSpot’s operating profits saw a significant year-over-year increase of 36%, with operating margins rising to 18.7%, partly due to a one-time benefit of $7 million.

“After flowing through strong results and stable outlook, we raise revenue and EPS for this year and next,” Piper Sandler analysts led by Brent A. Bracelin noted. This, and the target price raise, aims to reflect the potential for a small and medium-sized business (SMB) recovery by 2026.

But despite these positive adjustments, Piper Sandler raised concerns over the stock's recent price surge, which has seen HubSpot shares climb 33% over the past three months, outpacing the S&P 500's 13% gain.

The firm noted that HubSpot's shares now seem "fairly valued," trading at 9.5 times enterprise value to sales (EV/S) and 50 times enterprise value to free cash flow (EV/FCF) based on calendar year 2026 estimates.

“We lower to Neutral as the risk-reward above $640 appears balanced,” analysts highlighted.

HubSpot's fourth-quarter growth outlook of 15% was deemed conservative by the analysts, given the company's history of outperforming guidance. Nevertheless, they remain optimistic about the stock’s long-term prospects, describing it as a high-quality growth asset.

For now, the current valuation metrics present a challenge for maintaining a higher rating.

Analysts said they would “closely monitor risk-reward and demand fundamentals that might help justify further multiple expansion into 2025.”